Impact of Slum Redevelopment Projects on Labour Market Outcomes: Evidence from Addis Ababa

In this paper, I examined the impact of an in-situ slum redevelopment project on the hourly earnings of the labour force in Addis Ababa, Ethiopia. Combining 7 rounds of geo-coded Urban Employment Unemployment Survey with the condominium plans, I applied a difference in differences methodology with variation in treatment timing. As a novel approach, I investigated the impact of the construction and completion of the condominiums as two separate treatments. The results indicated that the construction and completion of the condominiums increased the hourly earnings by 17 percent and 31 percent, respectively. I also defined two mechanisms to explain the increase in earnings: 1) virtuous cycle and growth channel and 2) displacement and replacement channel. The former relied on the agglomeration effect, while the latter relied on inter-neighbourhood migration. Mediation analysis illustrated that both channels coexisted. The increase in earnings, however, was not equally distributed across different groups. During the construction stage, the construction workers were the main benefiters of the programme and the earnings of the workforce working outside the construction sector did not significantly increase. Additionally, both treatments failed to increase the earnings of women and lower-income groups, which might exacerbate existing gender and income inequalities in society. Moreover, I found that the construction stage increased informalization and decreased female work hours.